Water.europa.eu Indepth assessment economic analysis progress report SCG meeting 14-15 May 2008 Maria Brättemark, Unit D.2, DG Environment, European Commission.

water.europa.eu

Indepth assessment economic analysisprogress report

SCG meeting 14-15 May 2008

Maria Brättemark, Unit D.2, DG Environment, European Commission

Slide 2

water.europa.eu

Outline

•Recall the 1st implementation report

•Scope of the in-depth assessment

•Initial conclusions

•Way forward

Slide 3

water.europa.eu

0

5

10

15

20

25

Households Industry Agriculture

Sector

No

. of

Mem

ber

Sta

tes

MS providing noinformation

MS providingincompleteinformation

MS providing information

Implementation Results Article 5 analysis - 7

Information available on cost recovery

Slide 4

water.europa.eu

0

5

10

15

20

25

Financial/ investmentcosts

Resource costs Environmental costs

Costs and factors included in analysis

No

. of

Mem

ber

Sta

tes

MS providing no information

MS providing incompleteinformation

MS providing information

Implementation Results Article 5 analysis - 8

Information available on costs considered for cost recovery

Slide 5

water.europa.eu

Scope : in-depth assessment – annex IIIThe economic analysis shall contain enough information in sufficient

detail (taking account of the costs associated with collection of the

relevant data) in order to:

(a) make the relevant calculations necessary for taking into

account under Article 9 the principle of recovery of the costs of water

services, taking account of long term forecasts of supply and demand

for water in the River Basin District and, where necessary:

– estimates of the volume, prices and costs associated with water

services, and

– estimates of relevant investment including forecasts of such

investments;

(b) make judgements about the most cost effective combination of

measures in respect of water uses to be included in the programme of

measures under Article 11 based on estimates of the potential costs of

such measures.

Slide 6

water.europa.eu

Scope : in-depth assessment – article 9 • principle of recovery of the costs of water services, including

environmental and resource costs,

• the polluter pays principle.

• that water pricing policies provide adequate incentives for users to

use water resources efficiently, and thereby contribute to the

environmental objectives of this Directive;

• an adequate contribution of the different water uses, disaggregated

into at least industry, households and agriculture,

• social, environmental and economic effects of the recovery + the

geographic and climatic conditions of the region or regions affected.

• funding of particular preventative or remedial measures in order to

achieve the objectives of this Directive.

• established practices for a given water use activity, where this does

not compromise the purposes and the achievement of the objectives

of this Directive.

Slide 7

water.europa.eu

Why now ? • 2009 RBMP shall include - the planned steps towards implementing paragraph 1 which

will contribute to achieving the environmental objectives of

this Directive and on the contribution made by the various

water uses to the recovery of the costs of water services.- summary of the art 5 reports economic analysis

• Reality check on how the economic principles of the

WFD are implemented – but of 2005 progress…

• Reporting formats to be developed.

• Legal action - further dialogue with MS on progress

towards RBMP, key problems encountered – possibly

workshop 29-30.9.2008.

• Testing a methodology for 2010 in-depth assessments

Helps us to get early warning on poor performance …

Slide 8

water.europa.eu

Questions asked indepth assessment

All relevant economic issues to be analysed and

reported:

1. Definition of water services and consideration of water uses

2. Level of cost recovery/which costs are included and how

2a. Sub-topic: Calculation of cost recovery

2b Sub-topic: Environmental and resource costs

2c Sub-topic: Incentive pricing

3. Baseline scenario

4. Information base for making judgements on cost

effectiveness of measures

Slide 9

water.europa.eu

Overall impressions• Quality is diverse – but quality generally too poor

• Mixture of poor reporting and/or poor analysis

• Low level of technical links between economic analyis

and P&I analysis

• Level of detail reported often insufficient for the

preparation of implementation of article 9

• Low level of international coordination

• Few MS have reached sufficient “scores” – efforts are

needed; No MS sufficient efforts in all areas.

• A number of “good practices” however identified…

Slide 10

water.europa.eu

Specific comments (1)Definition of water services and consideration of water

uses :- Some work done on water uses in most Member States, but links

with P&I weak- Links between water uses and the water services not well

developed- Narrow application of the term water services in a larger number of

cases- Different approaches to inclusion of self-services – examples of

excluded “self abstraction” for instance by industry is reported to be about 30 % - significant !

Cost recovery :-Big gaps in information on certain uses, in particular agriculture-Little work on water uses contribution to the costs of water services-Little consideration of environmental and resource costs – an even less quantified information on ERC

Slide 11

water.europa.eu

Specific comment (2)Cost recovery (cont’d)

-No substantial information on considerations of polluter pays principles and little consideration of incentive properties of water pricing – core requirements of art 9

Baseline scenarios :- Some work done projections of trends, but rarely beyond 2015- WATECO recommendations on baseline rarely followed

Cost effectiveness analysis :-At the time of reporting these issues, one of the least developed areas were basis for developing cost-effective set of measures.

Slide 12

water.europa.eu

Environment and resource costsERC mentioned (of 21 completed assessments) :- Agriculture : 6/21- Industry : 8/21- Households : 8/21- Other : 5/21

ERC calculated (of 21 completed assessments) :Agriculture : 4/21 *Industry : 5/21 *Households : 5/21 *Other : 3/21 *

*Partial calculations !

Slide 13

water.europa.eu

Specific estimates water service volumes, prices and costs

(of 23 completed assessments) :

- Whole supply chain : 9/23 (partial 5/23)- Waste water treatment : 5/23 (partial 9/23)- Abstraction : 2/23 (partial 6/23)

- Impoundment : 0/23 (partial 0/23)

- Storage : 0/23 (partial 0/23)

- Treatment : 0/23 (partial 2/23)

- Distribution : 1/23 (partial 3/23)

Slide 14

water.europa.eu

Way forward

• Finalisation of these internal reports – to support the legal

assessments of compliance with the WFD requirements

• Workshop - to seek dialogue on MS progress and COM

expectations on the economic components of the RBMP

• Request to Water Directors to update the list of contact

persons on water economics, for the purpose of this report,

but also other issues.

• Reporting formats – with WG D and network of economists –

to improve the reporting next time

• Legal action ?

Slide 15

water.europa.eu

Other economic projects

- Handbook on economic assessment – contracted to

COWI.

- Competitiveness study

- Aquamoney

- Water scarcity : water demand scenarios.

- New projects in pipeline

- Exemptions - see other presentation